UK Government Launches ATOL Consultation

Up to six million extra holidays out of the UK could be covered by the Air Travel Operators’ License (ATOL) scheme under reform proposals put forward on 23rd June for consultation by UK Aviation Minister Theresa Villiers. The deadline for response is 15th September and the Government plans to introduce the necessary legislation by January 2012. The main proposal is to extend ATOL to include ‘flight-plus’ holidays.

Holders of a new flight-plus ATOL would not be brought within the Package Travel Regulations. Nor will travel agents become liable for VAT under the Tour Operators Margin Fund.

The reforms are also intended to put the ATOL fund back on a financially sustainable basis, removing the need for the taxpayer support currently given via a government guarantee of £42 million.

Dame Deidre Hutton, Chair of the UK Civil Aviation Authority, which runs the ATOL scheme, said: “The CAA welcomes the reform proposals because they will bring clarity for consumers and put an end to the situation where people are left unsure to what extent their holidays are protected if their company fails. Today’s announcement will empower consumers to make informed choices about their air holidays. This is the first step in the reform of consumer financial protection and the CAA will be consulting on further proposals on the funding of protection in the autumn.”

The proposals include:

extending the ATOL scheme to ‘flight-plus’ holidays comprising a flight and other holiday component bought within two successive days

ensuring everyone booking ATOL protected holidays will get a recognisable ATOL certificate confirming their rights under the scheme for refunds and repatriation should their travel company fail

helping ensure that ‘agent for the consumer’ businesses arranging holidays are fully aware of their legal responsibilities to consumers

Views are also being sought on further potential reforms that would require primary legislation, including bringing holiday sales by airlines into the scheme along with those arranged on an ‘agent for the consumer’ basis. These reforms could be brought in by May 2013.

In 2010 over 190,000 UK holidaymakers were repatriated or received full refunds when their ATOL tour operator went bust. Airlines are legally exempt from the requirement to hold an ATOL, but any package holidays they sell must still be financially protected. A number of UK airlines have subsequently set up subsidiary companies to sell package holidays that do have an ATOL license.

Legally, businesses are required to have an ATOL license if they sell package holidays or certain ‘flight only’ tickets to customers. Some businesses, however, do not technically ‘sell’ the flight element of a holiday, instead they buy it on behalf of the customer. This arrangement, referred to as ‘agent for the customer’, does not require an ATOL license. Customers buying a flight and accommodation in this way are not therefore protected by the ATOL scheme, but may be unaware of this.